Avoiding insolvency in the Third Sector, as pension deficit claims yet another charity victim

 

NEWS that another leading charity has fallen into insolvency as a result of rising pension costs will send further shockwaves around the Third Sector across Yorkshire and the North East, and the whole of the UK.

According to reports in the insolvency media, the Rural Development Council closed its doors at the end of March – after spearheading the business renaissance of the Northern Ireland countryside for almost 30 years.

The charity has blamed mounting pension payments and a lack of flexibility in the region’s local government pension scheme as the triggers for insolvency.

Ahead of insolvency, its pension deficit was reported to be in excess of £3m.

RDC were unable to secure the financial support required to stave off insolvency, ending up “trapped” in the scheme and not being able to afford to exit.

Having to pay contributions, which effectively depleted their assets, was partly to blame for a slow and painful demise into insolvency.

The threat of insolvency that confronted RDC is one that will be no stranger to the ever-increasing number of charities and not-for-profits considering their future.

There are 185,000 registered charities in the UK, with around 11,000 of these in Yorkshire and 5,000 in the North East. And sadly many good causes in Yorkshire and the North East are not immune to the threat of insolvency, amid unprecedented financial pressures.

Indeed, RDC Chair Tony McCusker said in the charity’s insolvency announcement: “We have witnessed a number of charities closing over recent years with increasing pension costs often the main contributor.”

This latest insolvency seems to have crept up on the charity. In a recent annual report, it reported that: “There is no reason to believe that future pension demands would threaten the solvency of the organisation.”

But the problem escalated at such speed and scale that the RDC had too little time to find a solution that potentially would have staved off insolvency.

Walsh Taylor works closely with the Third Sector to explore ways that struggling charities can avoid the costly process of liquidation wherever possible.

We have experience and expertise in pushing the boundaries and developing innovative ways of preventing their liquidation.

It is an insolvency approach that has enabled charities to transfer services and staff successfully to another like-minded organisation, and dissolve, even when they have a deficit.

For more information about the work of our licensed insolvency practitioners and businesses recovery teams in Leeds, Bradford, Harrogate and Darlington, including our experience in dissolving a charity while retaining services, please call us on 03300 244 660 or email confidential@walshtaylor.co.uk